International Crude Oil Prices Rise Amid Supply Concerns

International Crude Oil Prices Rise Amid Supply Concerns

VoM News Desk | September 18, 2023 | 11:23 AM IST | Breaking News | Follow on Google News

International Crude Oil Prices Rise Amid Supply Concerns

International crude oil prices continued their upward trajectory on Monday due to ongoing supply concerns driven by output cuts by Saudi Arabia and Russia. This trend comes as traders closely monitor the upcoming meeting of the US Federal Reserve’s Federal Open Market Committee.

Brent Crude and WTI Prices

Around 1.30 pm, the November contract of Brent on the Intercontinental Exchange was trading at $94.26 per barrel, marking a 0.35% increase compared to its previous close. Meanwhile, the October contract of West Texas Intermediate (WTI) on the NYMEX was trading at $91.21 a barrel, reflecting a 0.48% rise from its previous close.

Factors Driving Crude Oil Prices

Ravindra Rao, Head of Commodity Research at Kotak Securities, noted that crude futures have experienced three consecutive weekly gains due to the extension of supply curbs by Saudi Arabia and Russia, which have tightened the oil market outlook. Additionally, the International Energy Agency (IEA) projected that demand would exceed supply by an average of 1.2 million barrels per day (mbpd) during the second half of the year. Furthermore, an OPEC report indicated that global oil markets are facing a supply shortfall of 3.3 mbpd in the next quarter, potentially the largest deficit in over a decade.

Rao highlighted that economic data from China showed an acceleration in August, while the likelihood of a soft landing for the US economy remains high, providing support to oil prices. The outlook for Fed policy and Western Manufacturing Purchasing Managers’ Indices (PMIs) will be closely monitored in the coming week.

Rahul Kalantri, Vice President of Commodities at Mehta Equities Ltd, added that crude oil prices have gained strength following OPEC+’s decision to extend output cuts until the end of 2023. Additionally, better-than-expected US economic data and the People’s Bank of China’s decision to reduce its reserve requirement ratio (RRR) by 25 basis points have supported crude prices.

Impact on India and Windfall Tax

Rising crude oil prices hold significance for India, as the country imports approximately 85% of its energy needs. In response to the recent price increases, the Indian government raised the windfall tax on the sale of domestic crude oil to ₹10,000 per tonne, up from ₹6,700 per tonne.

The Indian crude oil basket, representing a derived basket comprising sour and sweet grade crude oil processed in Indian refineries, has seen an increase in the past three months. In June, it averaged $74.93 per barrel, while as of September 15, it stood at $95.45 per barrel.

VoM News Desk

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